The Public Sector Development Program (PSDP) is considered a means to achieve macroeconomic stability through the strengthening of a nation’s infrastructural backbone. It is a budgeted spending allocation for essential development in the health, education, communication, power generation, ports, rural development and community services sectors – economic commodities that increase public welfare but have an associated ‘free-rider problem’.
The entire concept revolves around this provision: the government provides where the private sector fails. However, in Pakistan, PSDP allocations have entirely failed to achieve the goal of sustainable economic growth through the provision of public goods.
Development falls under the ambit of localised administrative bodies all over the world, but the local government system has not been formulated with the spirit of economic empowerment in Pakistan. Consequently, continued delays in the formation of an effective and empowered local body system continue to be a major hurdle in achieving development objectives.
It seems, in Pakistan, that the PSDP is more politically motivated than intended for the general, selfless good of the public. The basic flaw lies in its political dynamic, wherein development funds are allocated to legislators (senators and parliamentarians) for disbursement at their discretion for development programs in their respective constituencies. Consequently, these funds are not only diverted from those whose needs merit attention, but the mechanism also leaves too much room for corruption.
Even though the needs of the country are many, the development budget has rarely been honoured in the past. In 2010-11, the federal government slashed development allocations due to unprecedented flooding in the country; meanwhile, non-development funds were not touched in the provisioning for losses. This is a recurrent theme; the budgeted PSDP amount is usually the first to be slashed whenever the government fails to balance its revenues and expenditures.
In 2011-12, Rs730 billion were allocated for the PSDP – 58% higher than revised budget estimates of the previous year, but only 3.4% of Gross Domestic Product. The federal share in PSDP funds was around Rs300 billion, whereas Provincial Development Programmes were to receive Rs430 billion. It was claimed that the federal PSDP was developed in line with the government’s ‘New Growth Strategy’ focusing on innovation, institutional reforms and entrepreneurship; as opposed to growth of physical infrastructure. Despite such claims, 57% of the total federal PSDP budget was spent in infrastructural development and only 42% was diverted to social sectors.
For 2012-13, the government has allocated Rs873 billion for the PSDP. Out of the total, Rs360 billion will be spent by the federal government, while the remaining Rs513 billion will be allocated by provinces. It should be noted that 98% of the budgeted amount will be spent on funding ongoing projects, as the report says itself, while only 2% of the total will be spent on initiating new ones.
Another fundamental problem in the system that renders PSDP spending largely ineffective is the lack of a strong regulatory mechanism for the monitoring and evaluation of programmes that fall under its ambit. The projects are not evaluated on their output or outcomes, which leads to deep-rooted inefficiencies and irregularities. For instance, we have spent huge amounts for power generation in the recent decades, and yet the power crisis has only exacerbated over the years.
In Pakistan, the term development is often confused with the improvement of governance. An examination of the current year’s PSDP budget reveals that major allocations were made to 32 federal ministries and divisions for increasing and strengthening of governance, which does not amount to ‘development’ in its real sense. ‘Development’ entails the social development of the people of a country; not the development of the system that governs them.
The 18th Amendment has been a welcome move in so far as it has increased the provincial share of resources. However, even planning at a provincial level fails when it comes to public sector development, because the concept works best with complete fiscal decentralisation. The money should be spent on those who actually need it – in line with the basic economic concepts of efficiency and maximising utility – and not for the short-lived gains of this political party or that.
The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing an M.Phil degree in Economics.
Published in The Express Tribune, June 11th, 2012.
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